FIND the ANSWERS to your most commonly asked QUESTIONS about MONEY & KIDS! If you have a question you would like answered, please click here: ASK TAMMY
Dear Tammy: Whenever I get any money (allowance, Christmas, birthdays) my parents always make me split it up into my jars. Why don’t they just let me do what I want with my money? – It’s My Money
Dear It’s My Money: It can seem like your parents are being mean and not letting you just spend your money on the fun things that you want, but they are really helping you to understand a very important part of life. You would probably prefer to spend all your time playing and relaxing, but you need to go to school, help out around the house, and go to bed as well. Learning to manage your money for all the different needs, not just the fun stuff, is one of the most important life lessons. By insisting on using your jars your parents are setting you up for a lifetime of success.
Dear Tammy: When I go to the store and it says $4.99 on the price tag, why do I have to pay $5.24? – What are Taxes?
Dear What are Taxes?: In Canada we have a federal sales tax called the Goods & Services Tax aka GST for all consumer purchases (some groceries are excluded) that is added on to the final price when you go to pay at the till. The GST is currently 5%, so when you go to pay for your $4.99 item the store has to add the 5% tax (in this case $0.35) to the final price bringing your total to $5.34. In most provinces in Canada there is also a Provincial Sales Tax aka PST which is also added on top of the GST. The PST can range from an additional 5% up to 10%. In that case your final cost on your $4.99 item could be anywhere from $5.34 with GST only up to $5.74 with GST and PST
Dear Tammy: I know that money is a part of life and I want my kids to know how to handle it, but I don’t know when I should start teaching them. My kids are toddlers and preschoolers. When is the best time to start? – Is It Too Early
Dear Is It Too Early: First off congratulations on wanting to teach your kids about money. Now to answer your question, you can start teaching your kids about money as soon as they can talk. Obviously the money lessons for your toddlers are going to be much simpler than for older kids and teenagers, but they can still learn. You can start with things as simple as explaining that you need to pay for things when you go to buy something at a store and letting them hand the money over to the sales clerk. Young kids pay very close attention to everything their parents do so when you explain things to them and make them part of the process they learn and start to ask questions.
Dear Tammy: My kids are constantly asking me for every new toy they see on TV. They are driving me crazy. How can I get them to understand that things cost money and I can’t afford to get them everything they want? – Greedy Children
Dear Greedy Children: While TV can be a wonderful and mostly harmless form of entertainment for kids and adults alike, the biggest part of television is the never ending marketing stream. From the actual commercials to the TV shows themselves with their merchandising (Monster High, Disney, and Dora the Explorer just to name a few) we are inundated with messages to buy this and that. One of the best ways I have found to deal with this is to give the kids an allowance and set them up using the jar system (financial freedom, long term savings, education, charity, play, and gifts) and allow them to buy their own toys and other items. If it is a larger purchase they have to save up and use the money in their long term savings jar. Smaller items can be purchased out of their play money. Once they mentally and emotionally grasp the fact that things cost money and it is actually their money they majorly slowdown in their consumerism and appreciate the things we do get for them more.
Dear Tammy: My daughter started school this year and has already been invited to 8 birthday parties. While I am glad she is making friends and having fun the cost for the presents is really starting to add up. How can I deal with this without feeling like a Scrooge? – Too Many Birthdays
Dear Too Many Birthdays: Welcome to the joy of having kids in school. Parents around the world feel your pain as this is a common complaint once our little ones start school and making new friends. Especially in the younger grades, parents will invite every child to the party to make sure that no one is left out. While this is a kind and generous sentiment the costs quickly add up for the hosting parent in terms of food, activities, and goodie bags for the participants but it also adds up for the guests as they can be invited to multiple parties a month if not weekend and no one goes without a gift. One way to deal with this is to set a limit on the number of parties your child can go to throughout the year. Maybe have them pick their three or five best friends (or whatever number works for you) and those are the parties they can go to. Any other invitations will have to be politely declined. By talking with your daughter and having her help you make the decisions it will be easier than just saying no yourself, or being stressed every time you get an invite.
Dear Tammy: I just started my first job and I don’t know what I should do with my paycheques. I plan on going to university in another province once I graduate, so I want to save money for that and still have a life now. What should I do? – First Job
Dear First Job: Congratulations on your first job. It is a big step and will give you many opportunities to learn new things and have money to do the fun things you want to do know and save for your future university time. One of the best ways to handle your new paycheques is to split them in half. One half can go into your university savings (and I recommend a single RESP for that so you can take advantage of the available grants to build your money faster) and half to be split amongst your jars (financial freedom, long term savings, charity, education, play, and gifts). This allows you to save and grow your money for the future and have money to spend for the fun things you want to do now.
Dear Tammy: My kids are in junior high and I have always given them an allowance. As they are getting older I want to tie their allowance to something, but not to household chores. What can I do? – Allowance as a Motivator
Dear Allowance As a Motivator: First off I am glad to hear that you aren’t tying the allowance to household chores. I firmly believe that all family members need to participate in keeping a household running as it teaches responsibility and being part of a team. As for suggestions, one of my personal favourites is tying allowances to reading. The best part is that you choose the books. You can put together a list of good, life enhancing books for your kids to choose from and when they give you a report (it can be a short verbal question and answer period with you or even a short written report) then your kids earn their allowance. A few of my favorite books are:
The Success Principles by Jack Canfield
Rich Dad Poor Dad by Robert Kiyosaki
The Slight Edge by Jeff Olsen
The 7 Habits of Highly Successful Teens by Sean Covey
The Gift by Jim Stovall
Think and Grow Rich by Napoleon Hill
How to Win Friends and Influence People by Dale Carnegie
This way your kids are learning things that will help them for life while they are earning their allowance.
Dear Tammy: My parents have told me that they won’t pay for my lunches in the school cafeteria anymore and I will have to start bringing my lunch from home. Why are they being so mean? – No More Free Lunch
Dear No More Free Lunch: Sorry, but I have to agree with your parents on this front and tell you they aren’t being mean. What your parents are doing is teaching you a couple of very important life lessons. First off most cafeteria food isn’t the best for you. Secondly, and a bigger issue, is the fact that while each lunch might only add up to a few bucks when you spread that over a school year the bill can be quite substantial. The number one biggest discretionary expense in most households are the various forms of eating out. If you normally spend $6 every day for lunch in the cafeteria after one school year you have put out $1,200. By bringing your lunch from home you can choose better and more food for less money and put your savings into something much better such as saving for post-secondary education, a vacation, or even a vehicle.
Dear Tammy: I’m always bringing home all sorts of fundraising things from school. Why are we always having to sell things? I Don’t Want To Sell
Dear I Don’t Want To Sell: Unfortunately not everything you want to do and have in school is covered by the money provided to your school so in order to do fun things such as field trips, have more technology in your classrooms (laptops, SMART boards, and iPads) your school council needs to raise extra funds through fundraising. By helping to sell the various things you are putting better stuff in your classrooms and learning the ever important skill of sales. The most successful people in the world know how to sell not just products but ideas. When you learn how to sell you learn how to succeed in life.
Dear Tammy: I want to start giving my kids an allowance so they can start to learn to manage money. How much should I give them and should I tie it to household chores? Questioning Mom
Dear Questioning Mom: Giving kids an allowance is a great way to teach kids how to handle money and make spending decisions, so congrats on making the decision to start. How much you give them is up to you and depends on the age of the children. If you are using the jar system (financial freedom, long term savings, education, charity, gifts, and play) it is best to give amounts that can easily be split between the jars. With preschoolers you might want to do $3 a week so $0.50 can go into each jar. With school age kids you might want to do $6 or $12. Whatever amount you choose is fine, just be consistent. As for making the allowance dependent on normal household chores I am personally not a fan of this route because I believe that every family member needs to contribute to the smooth running of the household to the best of their ability. Allowance should be to teach financial responsibility and that is easiest when you don’t also have to make it a battle about chores.